NSSF Interest Rate Drops by 1% as Membership Grows to 1.7M

NSSF Managing Director Richard Byarugaba speaking at the Fund's Annual Members' Meeting at Serena Hotel on Thursday

The National Social Security Fund (NSSF) has Thursday announced a 1% drop in its interest rate paid to its members upon receiving their pension benefits. For financial year that ended June 2017, NSSF will pay its beneficiaries 11.23% interest rate down from 12.3% the previous financial year.

The announcement was made by the State Minister for Investment and Privatization Evelyne Anite who represented the Finance Minister at the annual NSSF Annual Members’ Meeting held at Kampala Serena Hotel.

While explaining the new rate, NSSF’s Managing Director Richard Byarugaba attributed the regression to the economic slow down that dominated the most part of 2016 in addition to the continued easing in monetary policy by the Central Bank.

“86% of NSSF’s total revenue comes from the fixed income investments. Much of last year, Central Bank signaled a lowering of interest rates with a 7 percentage point drop,” Byarugaba said.

“Unfortunately, while to most people, low interest rate is good, to us this is bad because it affects the returns that we are making off fixed income,” he added.

The 2016/17 performance report shows that NSSF’s total assets amount to Ush 7.9 trillion and 98% of these are investment assets.

On the flip side, the Fund’s earnings grew by 35% to Ush 917 billion from Ush 674 billion in the previous year while total contributions also went up by 18.5% to Ush Ush 917 billion. In the same year, NSSF added new members and employers by an increment of 9% and 14% respectively.

In total, the asset portfolio now stands at Ush 7.9 trillion up from Ush 6.58 trillion the previous year.

While Byarugaba noted that it is important for the Fund to diversify its investments to other areas like equities and real estate as a way of protecting itself from inflation risks, he said that few opportunities exist in Uganda’s context.

Despite the tough economic environment, Byarugaba stated that benefits given to members amounting to Ush 278 billion was an outperformance of the market, especially commercial banks.

However, Usher Wilson Owere the Chairman General of the Uganda National Organization of Trade Union expressed concerns over the slash in the NSSF interest rate saying that members deserve more.

“The Ministry of Finance has no stake in social security funds. Thus is our (employees) money. Why would NSSF continue to pay free money (Ush 4 billion) to Uganda Retirements and Benefits Regulatory Authority (URBRA) when this money would have been added to our interest?” Owere asked.

He agitated for the withdrawal of the proposed Pension Sector Liberalization Bill which workers’ unionists have been arguing does not guarantee the safety of workers’ pension.

“We want more interest. We don’t have to play around with workers’ hard earned money. We discussed with the Minister of Finance and agreed that the Bill would be withdrawn. I don’t know why it is still in Parliament,” Owere said.

NSSF targets to hit a total value of Ush 20 trillion in the next eight years, according to the Board Chairman Patrick Kaberenge. He urged government to fastrack the reforms in the NSSF and URBRA Acts to introduce a tier system that will enable members to access their benefits before 55 years.

Got Something To Say?

Leave a comment.

Your email address will not be published. Required fields are marked *